O2 and Virgin Media merger to create £31bn telecoms giant

Virgin Media and O2 are to join forces in a UK merger that will create a £31bn company, their parent firms have announced.

US media firm Liberty Global, the owner of the Virgin Media cable TV and broadband provider, said the agreement would unlock a £10bn investment in the UK market over five years once completed.

That was anticipated next year, subject to regulatory clearances.

Mobile provider O2 is part of the Spanish firm Telefonica.

Its chief executive, Jose Maria Alvarez-Pallete, said: “Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the UK, at a time when demand for connectivity has never been greater or more critical.

“We are creating a strong competitor with significant scale and financial strength to invest in UK digital infrastructure and give millions of consumer, business and public sector customers more choice and value.”

Telefonica and Liberty, which will have an equal share in the new joint venture, told investors that the tie-up would also realise savings of more than £6bn a year by the fifth year.

There was no detail on whether that signalled job losses ahead.

Both expect to receive net cash proceeds on completion of the deal – with almost £6m for Telefonica and £1.4bn for Liberty.

It allows the Spanish firm to squeeze cash from O2 and keep a presence in Britain, while Virgin gains access to its own wireless network, saving the money it has spent until now on leasing capacity for its mobile operations.

Telefonica shares were 3% up in early Thursday deals.

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